om finance final

Module Leader: Mr Hector Dela VictoriaAdditional Tutor: Dr. Abhijit Ganguly

Submitted By: Chintan Gosai

Operational Management

[Operational Management] 2012

Contents

Introduction & Brief History.....................................................................................3

Managing Finance.......................................................................................................3

Financial Institutions....................................................................................................3

Role of Financial Institutions.......................................................................................4

Types and role financial Institutions............................................................................4

Commercial Banks..................................................................................................4

Saving Institutions...................................................................................................5

Credit Union.............................................................................................................5

Insurance Companies..............................................................................................5

Pension Funds.........................................................................................................6

Ratio analysis..............................................................................................................6

Human Resource Management..................................................................................9

Recruitment & Selection..........................................................................................9

Recruitment & Selection at Sainsbury’s.................................................................10

Validity and Reliability............................................................................................11

Managing Information...............................................................................................12

Role & Importance Information Communications Technology (ICT)......................12

Role of IS in Sainsbury’s.......................................................................................13

Conclusion................................................................................................................16

Recommendation......................................................................................................16

References................................................................................................................18


Introduction & Brief History

J Sainsbury was established in 1869 and steadily grew to become one of the largest

retailers in the UK. Currently, it stands behind only Tesco and ASDA in the UK retail

market industry. Every organisation needs to have a successful operations management

team in place in order to be successful. The three aspects of operations management

which need to be covered include managing finances, managing human resources and

managing information technology. Certain aspects of each of these areas have been

analysed below to consider Sainsbury’s operations management. These resources when

leveraged properly would benefit Sainsbury’s. The report begins with the definition and

role of several financial institutions followed by a financial ratio analysis of Sainsbury’s

which suggests how the financial performance can be improved and how the financial

institutions can help. This is followed by an analysis of Sainsbury’s recruitment and

selection procedures to assess their impact on overall business performance. Finally,

the report considers the IT capabilities of Sainsbury’s and how these have been

leveraged. The report ends with a summary of the findings and the recommendations

that can be made based on these findings.

Managing Finance

Financial Institutions

Financial institutions are defined by Gup (2008) as “organisations whose principal

function is managing the financial asserts of business concerns and individuals.

They bring savers and borrowers together by selling securities and services to

savers, and then lending (or investing) those funds to borrowers” (Gup, 2008, p. 1).


Role of Financial Institutions

Since financial institutions accept deposits from investors and lend to borrowers

through securities purchases and loans, they serve the following purposes in the

markets suggested by Madura (2011):

1. They provide the service of depositing sources which has the characteristics

of liquidity and accommodation required by the investors.

2. They repackage amounts deposited by the investors to lend them to the

borrowers at the size and maturity they desire.

3. As a result, they provide a matching service efficiently that would be otherwise

hard to achieve by individuals on their own.

4. They manage the risks involved in making loans.

5. They ascertain the credit worthiness of borrowers in a better manner than

investors would be able to individually.

6. They use diversification to spread the risk of defaults on loans due to the sum

of investment available to them and therefore can absorb loan defaults in a

more efficient manner than individual investors would be able to.

Types and role financial Institutions

There are a number of different types of financial institutions. A few major types are

discussed here:

Commercial Banks

Commercial banks tend to be the foremost depository institutions. They offer

investors a large variety of deposit accounts and they transfer deposited money to

borrowers by offering loans. Commercial banks serve both the public and private

sectors including households, organisations, governments etc. Commercial banks

also lend money to one another in the instance when a certain bank has more

amounts being borrowed than amount being invested. The banks then lend money to

other banks through a federal funds market (Madura, 2011).


Saving Institutions

Another type of depository institutions are saving institutions, sometimes called thrift

institutions. These include savings banks, and savings and loan associations (S &

Ls). Saving institutions are similar to commercial banks such that they receive

deposits from investors and make loans to borrowers, but they differ in their

allocation of funds such that they concentrate on residential mortgage loans.

However, deregulation over the last 30 years has allowed savings institutions to

become more flexible in fund allocation, thinning the distinction between saving

institutions and commercial banks. However, an important distinction is that while

commercial banks are shareholder owned mostly, saving institutions tend to be

depositor owned ‘mutual’ institutions, although they can have shareholders too

(Madura, 2011).

Credit Union

Credit unions are distinguished from commercial banks and savings institutions in

two important ways; 1) they are non-profit institutions, 2) they are restricted in

providing services to members of a certain credit union with a common bond, for

instance an employee union. The second characteristic of credit unions tends to limit

the size of credit unions making them significantly smaller than commercial banks or

savings institutions. Credit unions generally exist to lend money to its members.

Insurance Companies

Insurance companies offer insurance policies to individuals and businesses that

ease the financial burden that comes with illness, death or damage to property.

Insurance companies charge a premium for the insurance provided and the

premiums collected are invested into other financial securities such as bonds or

stocks issued by the government or by organisations, until an insurance claim is

made and funds are required to cover these claims. Insurance companies finance

the borrowers through funds made available to them and hence act as important

financial intermediaries. The performance of insurance companies is largely linked to

the performance of the stock market or the bond market on which they invest

(Medure, 2011).


Pension Funds

Pension funds are run by funds received from pension plans offered by organisations

and governments to their employees. The funds are contributed by both the

employees and their employers. The pension fund is accumulated to pay for

retirement of the employees. The pension funds manage the funds until the

employees’ retirement by investing them into bonds or stocks issued by

organisations or government. In this way, they act similar to insurance companies by

financing the needs of the borrowers and hence serving as an important financial

intermediary.

Ratio analysis

The table below displays the financial ratios of Sainsbury’s for the last five years.

These ratios can be used to analyse the Sainsbury’s business performance.

Profitability Ratios 2012 2011 2010 2009 2008

Return on capital employed 11.1% 11.1% 11% 10.1% 8.8%

Gross profit margin 5.5% 5.5% 5.4% 5.5% 5.6%

Net profit margin 2.7% 3.0% 2.9% 3.6% 3.0%

Assets turnover 1.9% 1.9% 1.8% 1.9% 1.8%

Liquidity Ratios

Current ratio 0.60 0.58 0.64 0.54 0.61

Quick ratio 0.30 0.30 0.39 0.36 0.35

Activity Ratios

Average receivable turnover 54.5 61.5 92.9 60 56

Inventory turnover 21.6 26 27.4 26.2 29.1

Investor Ratios

Earnings per share 28.1 26.5 23.9 21.2 17.4

Dividend cover 1.75 1.75 1.68 1.67 1.63

Gearing Ratios


Debt to equity ratio 35.2 33.4 31.2 38.2 30.5

Sainsbury’s profitability ratios have been fairly stable over the past 5 years with gross

profit margin fluctuating slightly above or below 5.5 percent. This shows that despite a

growth in sales owing to new stores opening and increase in sales in current stores, the

cost of sales is increasing at a similar pace too, resulting in a steady gross profit margin.

This implies that Sainsbury’s has the potential to increase gross profit margin by

controlling cost of sales. The net profit margin jumped from 3 percent to 3.6 percent from

2008 to 2009, but has been steadily declining since then until 2012 where the lowest net

profit margin has been reported in the last 5 years of 2.7 percent. However, this seems

to be largely due to unrealised losses on financial instruments being revalued to their fair

value or pension liabilities changes. Since these losses are unrealised losses they may

or may not be permanent. However, this implies that Sainsbury’s should consider using

financial risk hedging in order to hedge the risk of financial losses in case they

materialise. Like other indicators of profitability, ROCE and ROA seem to be relatively

stable as well with ROCE fluctuating slightly around 11 percent and ROA fluctuating

slightly around 1.9 percent. This also suggests that the amount of capital employed in

the business and the assets available to support it and growing at the same rate as the

sales growth. This means that Sainsbury’s is relying on increase in asset base to

increase sales rather than increasing the efficiency of existing asset base and capital

employed. Therefore, Sainsbury’s should consider evaluating its processes in order to

increase efficiency of existing processes to improve the profitability and profitability ratios

of the organisation.

The liquidity ratios reveal the ability of the organisation to meet its short term cash

demands. Having a high ratio is essential to be able to meet short term liabilities but it

should not be high enough to indicate a hoarding of resources in the business which

would mean inefficient resource allocation. Since Sainsbury’s is a retailer and that too as

grocery retailer, it tends to have low liquidity because it holds fast-moving inventories of

goods which are sold at cash only. Sainsbury’s current ratio has also been fairly stable

around 0.6 except for 2009 when it fell to 0.54. The ratios indicate a fairly liquid position

where Sainsbury’s has 60p of current assets against every pound worth of current

liabilities. This shows that Sainsbury’s can fairly easily pay off its short term debts. The

quick ratio compares the most liquid current assets with current liabilities. This means

excluding inventory from the calculation of current assets. The values show that the

quick ratio has been decreasing over the last 5 years. This is despite an increase in


current ratio from 2009 to 2010 and from 2011 to 2012. This indicates that most of the

current assets of Sainsbury’s are in the form of inventories. A look at 2012’s current and

quick ratio shows that out of the 60p worth of current assets against every pound of

current liabilities, 30p is in the form of inventories. This means that half of Sainsbury’s

current assets are in the form of inventory. While this may not be of a great concern in a

fast-moving inventory business, which converts inventories into cash very quickly, this

seems like an inefficient use of resources as it may indicate an overstocking situation

where more cash is being held up in the form of inventories which are not required rather

than being invested in other more efficient places.

The activity ratios suggest how efficient Sainsbury’s is at converting its assets into cash.

Both the inventory turnover ratio and the receivables turnover ratio show a decreasing

trend. In 2008, the inventory was converted to cash an average of 29.1 times while this

has reduced 21.6 times in 2012. This shows that the activity has reduced and the

inventory is being held in the business for a longer period of time now than in 2008.

Similarly, the receivables turnover increased from 56 times in 2008 to 92.9 times in

2010. However, this has once again reduced to 54.5 times, which is the lowest turnover

in the past 5 years. This implies that Sainsbury’s debtors are taking longer than usual to

pay, which is again causing the efficiency of the business to be reduced as the

resources are tied into receivables or inventory when they can be used for investment

with a better return elsewhere. Overall, this shows that Sainsbury’s is not using its

resources in the most efficient manner.

The investor ratio calculated here is the Earning per share (EPS) and the dividend cover.

The EPS has demonstrated a positive trend. This is because in pound terms the net

profit has seen a steady growth while the number of shares in issue has remained fairly

constant. However, this represents increasing returns to shareholders and investors

which is always a positive sign. The dividend cover represents the number of times the

dividend can be covered by the net profit for the year. This has fluctuated between 1.65

and 1.75 over the last five years. Sainsbury’s has a target to maintain its dividend cover

above 1.75 which it has achieved in the last 2 years. The ratio implies that Sainsbury’s is

distributing nearly half of its income in dividends but also retains almost half of the

income to reinvest in the business and to fund expansions which is fairly reasonable.

This reinvestment has resulted in Sainsbury’s being able to fund operations and

expansion internally without having to issue fresh capital which has caused the EPS to

increase steadily as well.


Finally, the gearing ratio of Sainsbury’s has been considered. The debt to equity ratio

reveals a fluctuating trend with the ratio increasing from 30.5% in 2008 to 38.2% in 2009

before falling back to 31.2% in 2010. The current debt to equity ratio stands at 35.2%.

This shows that 35% of Sainsbury’s operations are financed by debt while the other 65%

is equity. This shows a low risk funding as most of the funds come from equity which

does not have a interest charge attached to it. However, this also shows that Sainsbury’s

has the ability to raise funds from outside sources easily in order to fund its expansion.

Therefore, Sainsbury’s can approach one of the financial institutions outlined above in

order to receive funding and do so easily due to its low debt to equity ratio.

Human Resource Management

Recruitment & Selection

Recruitment and selection are considered to be planned, rational activities, which

comprise sequenced stages of the process of resourcing employees; an activity that

forms part of the larger framework of human resource management. Bratton and Gold

(2007) make a distinction between the two terms by identifying a clear link between the

two, as follows:

“Recruitment is the process of generating a pool of capable people to apply for

employment to an organisation. Selection is the process by which managers and others

use specific instruments to choose from a pool of applicants a person or persons more

likely to succeed in the job(s), given management goals and legal requirements” (Bratton

and Gold, 2007, p. 39).

Foot and Hook (2005) add that despite being closely linked, recruitment and selection

require different skills and expertise and may or may not be carried out by different

employees. They highlight that the recruitment process might be outsourced to external

agencies but the selection process is generally kept in house, which clear differentiates

the two.

Recruitment and selection can be used as a strategic tool to shape any organisations’

effectiveness and to enhance performance. Organisations with the ability to attain

employees who possess the required skills and knowledge for their job, and the ability to


accurately predict the abilities they may generate in the future, can effectively improve

the organisation’s performance. Consequently, such organisations can save costs such

as costs pertaining to high employee absences or dissatisfied customers, as well as

create a mutually advantageous relationship with its employees generating commitment

by both the employer and the employee (French and Rumble, 2010).

Recruitment and selection gives organisations the opportunity to consider its employees

a source of competitive advantage, as well as form a key component of the human

resource management process. This leads to an interest in the fairness, reliability and

validity of the recruitment and selection process. Over the last 30 years, the changes in

work psychology have significantly influenced the modes through which employees are

recruited, by rigorously developing and evaluating the procedures used for selection

(Arnold et al, 2005).

As a result the validity and reliability of recruitment and selection tools is important.

Recruitment & Selection at Sainsbury’s

Recruitment and selection at Sainsbury’s goes through a four step procedure. All of

Sainsbury’s job vacancies are advertised and recruited through its online system.

Therefore, the first step for the process is to post vacancies on to the online system.

These vacancies are divided into different sections such as in-store jobs, finance etc.

The only way of applying to these jobs by applicants is to complete the online

application form. The application form has a psychometric test that tests the match of

the applicant with the organisational culture and the job, and a situational awareness

test that tests the applicant’s response judgment. This information is shared with the

applicants who are given feedback on how strong the match is.

The next step is finding out more about the applicants. If the first step identifies that

the applicant would be a good match for the role and Sainsbury’s overall, more

information is demanded through e-mail which includes previous addresses,

passport details, driving licence details, employment history including contact details,

and educational qualifications. Following this, Sainsbury’s makes any checks as

deemed necessary to further ascertain match. If the checks are all successful, the

applicant is invited to an interview. The details of the interview varies from job to job

but generally include an interview with an potential immediate line manager and

further tests such as numeracy, situational awareness etc. which are further meant


to identify the competence of the applicants. If the applicant is successful at this

stage, he or she is offered a job (Sainsburys, 2012).

Validity and Reliability

It is obvious that organisations wish to make sure that its recruitment and selection

procedures are effective, as would Sainsbury’s. However, it is also clear that making

decisions based on the applicant’s personal characteristics and match with

organisational culture is challenging and that frequently used selection procedures can

be significantly flawed. Organisations have to look for reliability and validity of

recruitment and selection procedures. French and Rumble (2010) elaborate what is

meant by reliability and validity in the context of recruitment and selection. They suggest

that reliability is concerned with temporal or re-test stability and consistency. Temporal

stability determines the effectiveness of selection tools by judging the consistent manner

in which it generates results. For instance, applicants could be asked to complete a

personality test at different times over several years. Consistency determines whether

the test measures what it aims to measure. For instance, some IQ tests may emphasise

an applicant’s vocabulary which would be enhanced by general and educational

backgrounds rather than being solely based on intelligence. Validity is based on face

validity, content validity and predictive validity. Face validity emphasises the extent to

which the selection tool used is acceptable. For instance, a correlation between a

person’s weight and strength may be probable which may help in jobs such as

stockroom controllers but applicants may be sceptical of having their weights measured

as part of the selection process. Content validity is concerned with the nature of the

measure and how adequate it is as a tool for selection. For instance, night time shift

managers would not be adequately tested if their on-job testing is conducted during the

day. Predictive validity is based on the link between scores on a certain selection test

and the future performance of the employee (French and Rumble, 2010).

It is clear that in order to improve its recruitment and selection procedures, Sainsbury’s

should consider the validity and reliability of its recruitment and selection procedures.

For instance, Sainsbury’s should consider enlarging its selection period to span over a

couple of months to allow re-test stability to be ensured by conducting similar tests

during the online application form and the interview. The cut off period would ascertain

that the online application test answers do not influence the answers in the interview and


hence re-test stability could be improved. Consistency is another important issue to be

considered. Sainsbury’s should ensure that the tests are devised by professionals who

are aware of the requirements of the job as well as the competences that are required

for the job. The questions should then be flexible enough to allow for the desired

competences to be connected to each job role than a generic one. For instance, a store

manager role would require different competences than a human resource expert and as

such the test should reflect the different competences required. Similarly, content validity

needs to be ensured such as asking a night time shift manager to do an on-the-job test

during the night instead of the day. Finally, predictive validity should be ascertained not

only to determine the effectiveness of the new recruits, but also for improving the quality

of future recruits.

Managing Information

Role & Importance Information Communications Technology (ICT)

ICT has increasingly become the fundamental component in organisations that impacts the

organisational design. Used in the appropriate manner, information systems and information

technology can leverage human resources, natural resources, raw materials and capital in

order to optimise organisational performance. ICT can be used to overhaul business

processes by designing processes around ICT to create synergies rather than just using ICT

as an add-on. ICT has changed how businesses work by changing the processes of

organisations, changing communication patterns and changing the way information is

processed and used for decision making (Pearlson and Saunders, 2010).

There is no doubt that the current era is that of technology where the technological

advancements are being made on a daily basis. While technology has altered the life of

individuals, at the same time it has also transformed businesses and business

processes. Nowadays, not only large businesses but even small and medium

businesses are highly dependent on technology for driving their operations, functions,

processes and infrastructures. Technology is also now viewed as a competitive source

for expansion and growth. Brown and Powell (2009) suggest that the most obvious and

immediate benefit of advancement in technology is its contribution to the transformation

of communication channels through tools such as e-mails, websites, instant messaging

etc. which have entirely reshaped communication within and outside businesses.


Improvements in communication have benefited both businesses and customers who

both now have information readily available to them or information that can be quickly

and easily be assimilated. Technologies such as satellite communication, networking,

cellular networks and internet have opened up new opportunities for business for

exploring, attracting and communicating with its customers.

Wijaya and Collery (2010) suggest that businesses appreciate the technological

breakthroughs because it gives them to opportunity to reduce costs, allow multi-tasking,

reduce errors, and assist in operational management. A number of manual tasks have

been replaced with computerised systems to save time, errors and labour costs. Even

quality management techniques such as Total Quality Management and Six Sigma are

more realistically achievable with the appropriate IT systems in place to implement them.

Moreover, IT alters the organisational decision making process, as well as the

information required for making these decisions. IT enables data that is needed to

produce timely and accurate information to be captured at source. This has resulted in

real-time information availability as well as a reduction in the need of data entry

employees who typed in information from data entry sheets into computers. Additionally,

it can alter the content and quantity of data available to the employees. Advancements in

technology have enabled organisations to maintain data warehouses where all

information is stored and can be retrieved to search for relevant information using data

mining tools. Data analytical tools have also advanced to allow employees and

managers to analyse data to identify trends, patterns or correlations between various

data. This information can be used by managers to make critical decisions. Moreover,

information systems such as decision support systems (DSS) and executive information

systems (EIS) support managers in making decisions as well. Overall, IT has facilitated

the flow of information to all levels of the organisation and provided the necessary tools

to filter and analyse this information, making decision making more informed, accurate

and timely (Pearlson and Saunders, 2010).

Role of IS in Sainsbury’s

Like any other organisation, Sainsbury’s makes use of information systems and

technologies in order to improve the organisational performance. Sainsbury’s uses IT in

a variety of different operational management processes. Its IT infrastructure ranges its

entire supply chain from manufacturers and suppliers to customers.


For manufacturers, Sainsbury’s has a web Electronic Data Interchange (EDI) in place

which allows it to communicate with manufacturers in real time to allow information

exchange regarding requirements, production volumes, product designs, and critical

path management. In addition, Sainsbury’s has a product performance and exception

management system called horizon. Horizon consists of three applications; alerting and

resolution management (ARM), product performance management (PPM) and

collaborative planning system (CPS) The ARM is a tool which automatically reports

breaches to pre-determined product thresholds to Sainsbury’s which can be tracked and

fixed quickly. PPM allows analysis of products such as average shelf life, sales volumes,

sales breakdown by time of the day etc. which allows Sainsbury’s and the manufacturers

or suppliers to mutually decide on a course of action based on the information available.

Finally, CPS allows Sainsbury’s and manufacturers or suppliers to collaborate in

planning promotions or new product launches etc. Another tool used by Sainsbury’s for

its suppliers is the Primary Stock Tracking (PST) that allows suppliers to track their stock

through Sainsbury’s to identify where they are being sold, in what quantity etc.

(Sainsbury, 2012).

All of these tools help create a stronger bond between the suppliers and Sainsbury’s as

well as allows suppliers to share control regarding their sales practices such as stock

volumes, promotions, displays etc. and hence reducing the burden on Sainsbury’s.

These IT packages also provide Sainsbury’s with real time information that they can use

themselves to make decisions regarding different products, for example deciding

whether it is profitable to continue selling a particular product at a particular branch, what

time the delivery should be timed in order for the product to be available at the right time

at which that product is mostly purchased, should the order quantity for a particular

product be increased or decreased etc. As a result, Sainsbury’s can operate a real time

inventory system which reduces inventory handling costs or the costs pertaining to stock

run-outs etc. Moreover, the ARM ensures that Sainsbury’s quality standards are

maintained and hence the tools also work as quality management technology.

Similarly, Sainsbury’s provides a number of IT solutions for its customers as well. In

addition to the Transactional Processing System (TPS) that records any sales directly

into the system, customers can also make purchases online on Sainsbury’s website

using the Online Transaction System (OLTP). In addition, Sainsbury’s has a loyalty card

scheme by the name of Nectar. The scheme enables customers to collect points on


purchases which they can redeem later on items they wish to purchase in the future.

This is a very useful data collection tool for Sainsbury’s. It allows Sainsbury’s to gather

information regarding each customer’s individual shopping preferences, brand

preferences, shopping patterns, types of products they are interested in etc. which

allows them to cater promotional material to that particular customer’s needs.

Consequently, any promotional material sent to customers at their home address or e-

mail would be tailored to that individual person’s preferences. Moreover, it will also give

information about shopping patterns of customers as a whole to Sainsbury’s which they

can use to make decisions regarding operations such as layout of stores, potential

locations of new stores etc. Finally, most recently, Sainsbury’s has introduced an IT tool

by the name of BrandWatch for its customers which allows customers to compare the

costs of a bucket of goods purchased against the cost of the same goods at its

competitors such as ASDA or Tesco. This tool can be accessed by customers using

Sainsbury’s website and it helps reinforce Sainsbury’s position as a competitive low cost

provider of goods, inducing brand loyalty in its customers (Sainsbury’s, 2012).

Sainsbury’s uses data accumulated from these various sources to feed into its own

internal systems such as Enterprise Resource Planning (ERP) which allows information

from internal sources such as Sainsbury’s own applications as well as external sources

such as government portals, new agencies etc. to be assimilated and shared throughout

the organisation to facilitate information flow as well as improve decision making by the

managers. This tool is integrated with the Online Analytical Processing (OLAP) system

which allows data to be data mined or analysed in order to reach appropriate

conclusions.


Conclusion

For any businesses’ operations to be successful, they need to be able to manage three

of its resources successfully; financial resources, human resources and IT resources. A

well balanced operations strategy to address all three of these aspects can serve a

company well. Sainsbury’s manages its resources fairly successfully. However, this

report highlights certain aspects of Sainsbury’s management of these resources which

can be improved upon to enhance the overall organisational performance. The financial

analysis identifies a steady return on investment for investors; however, it reveals low

efficiency for the usage of its current assets by tying up excess resources within the

business which can be improved. The human resource management is good but

Sainsbury’s can improve its recruitment and selection procedures by making sure they

are both valid and reliable. Finally, Sainsbury’s has incorporated IT at various levels

within the organisation and throughout its supply chain. However, full utilisation of these

systems is not being made as is evident by the financial analysis that the inventory is

being tied up in the business. Based on these findings, the following recommendations

can be made to Sainsbury’s.

Recommendation

First of all, Sainsbury’s needs to improve the usage of its resources to make them more

efficient. In particular, Sainsbury’s needs to manage its inventory and receivables well in

order to free up blocked resources which could be invested elsewhere to generate a

return, and to improve its liquidity position by improving the current and quick ratio. For

this purpose, Sainsbury’s should leverage its IT capabilities. With a little further effort

and planning, Sainsbury’s can implement a Just-in-Time (JIT) inventory system which

will allow it to order inventory on a JIT basis, i.e. only when the stock is low and

replenishment is needed so that when the fresh stock arrives, the stock can be displayed

and sold rather than being placed in the stock room. This will reduce the inventory

holding costs of Sainsbury’s as well as avoid stock build ups which results in tied up

resources. Therefore, Sainsbury’s can use its strengths in IT to tackle its financial

weaknesses.

Moreover, Sainsbury’s should consider the validity and reliability of its recruitment and

selection procedures. For instance, Sainsbury’s should consider enlarging its selection

period to span over a couple of months to allow re-test stability to be ensured by

conducting similar tests during the online application form and the interview. The cut off


period would ascertain that the online application test answers do not influence the

answers in the interview and hence re-test stability could be improved. Consistency is

another important issue to be considered. Sainsbury’s should ensure that the tests are

devised by professionals who are aware of the requirements of the job as well as the

competences that are required for the job. The questions should then be flexible enough

to allow for the desired competences to be connected to each job role than a generic

one. For instance, a store manager role would require different competences than a

human resource expert and as such the test should reflect the different competences

required. Similarly, content validity needs to be ensured such as asking a night time shift

manager to do an on-the-job test during the night instead of the day. Finally, predictive

validity should be ascertained not only to determine the effectiveness of the new recruits,

but also for improving the quality of future recruits.


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